Welcome to our comprehensive review of the recent Securities and Exchange Board of India (SEBI) amendments and insolvency case law updates in July 2023. From changes in credit rating norms to new regulatory frameworks for ESG, this article highlights the crucial developments that have occurred this year in securities law. We also delve into significant case laws within the realm of insolvency and discuss other notable updates in the corporate law space.
The SEBI has undertaken key amendments in July 2023, which notably include provisions related to ESG rating providers, non-convertible securities, and the LODR Regulations. These changes underscore the regulator’s commitment to improving transparency, accountability, and efficiency in the markets. The insolvency case laws, including the supremacy of IBC over RBI directions and conditions for admitting an application under IBC Section 7, provide crucial insights into the dynamics of the insolvency process in India. Additionally, the Securities law case study, highlighting the role of a non-executive director, showcases SEBI’s keen understanding of corporate governance norms.
SECURITIES LAW
1. SEBI Amends Credit Rating Agency Norms to Include Provisions Relating to ESG Rating Providers
- ESG rating services can only be provided by entities that have been certified
- Even foreign agencies require SEBI certification
- at least four employees specialised across the areas of governance, sustainability, social impact or social responsibility, data analytics, finance, information technology, and law
- Website to be maintained with ratings and methodology
- an ESG rating provider should not directly or indirectly hold 10% or more shareholding or voting rights in any other ESG rating provider
- SEBI (Credit Rating Agencies) (Amendment) Regulations, 2023
2. SEBI (Issue and Listing Of Non-convertible Securities) (Second Amendment) Regulations, 2023
- Information mentioned in placement memorandum divided into general information documents and key information document Mandatory From 31st March 2024 onwards
- New definition of senior management is also added
- SEBI (Issue & Listing of Non-Convertible Securities) (Second Amendment) Regulations, 2023
3. SEBI issues Master Circular for compliance with the provisions of the SEBI (LODR) Regulations, 2015.
- All circulars issued till June 30, 2023, complied in one master
- Certain circulars
4. SEBI notifies circular for Disclosure of material events / information by listed entities under SEBI (LODR) Regulations, 2015
- Guidance provided on details to be mentioned for disclosure of events of Para A & Para B of Part A of Schedule III
- Timeline provided for disclosure of events of Part A of Schedule III
- Guidance on what all is covered for disclosure under Reg 30
- Guidance on materiality of events or information
- SEBI Circular: Disclosure of Material Events by Listed Entities
5. Trading Window Closure period extended to all companies
- PAN Numbers of Designated Persons shall freeze for top 1000 companies by 1st October 2023 Next 1000 companies by January 1, 2024
- Remaining companies listed on BSE, NSE and Metropolitan Stock exchanges by 1st April 2024 Companies getting listed freshly- 1st day from the 2nd quarter.
- SEBI Circular: Extending Trading Window Closure Period for Listed Companies
6. SEBI Introduces BRSR Core Regulatory Framework for ESG
- SEBI has introduced a regulatory framework for listed entities on ESG disclosures for the value chain and assurance, as per the BRSR
- Further the applicability for reporting of BRSR and Reasonable assurance of the BRSR Core is also prescribed for the top listed entities (by market capitalisation).
- The revised format for BRSR and the format of BRSR core for reasonable assurance have also been specified.
- SEBI Circular: BRSR Core and ESG Disclosures for Value Chain
CASE LAWS
Insolvency law
In case of conflict in RBI directions and IBC, IBC shall hold good
- The financial creditor along with other sanctioned loans to the corporate debtor & entered into an inter-creditor agreement (ICA) pursuant to the RBI directions wherein the CD undertook to repay facilities availed in quarterly
- Due to default by the CD, the financial creditor filed an application u/s 7 of the IBC and the same was admitted by
- Dissatisfied by the impugned order, the CD filed an instant appeal contending that agreement is entered by lenders pursuant to RBI directions & no lender could initiate any legal action in a premature
- NCLAT held that IBC would have an overriding effect and RBI circular could not come in way of a financial creditor.
2. The admission of an application under section 7 of IBC if it meets certain criteria is a rule, while rejecting such an application is an exception.
- In the case of Mukesh Kumar Vs. Ambrance India Pvt Ltd and Other NCLAT held that :
- When admitting a petition under Article 7 of the IBC, there are certain relevant criteria that must be met and there must be debt and
- If the Adjudicating Authority is going to dismiss the application as per provisions contained Section 7 of the IBC reasons are mandatory.
CASE LAWS
Securities law
1. SEBI states while Company Has MD, Non-Executive Director Can’t Be Person In Default.
- In the recent order of SEBI Alchemist Holdings Limited & its directors were held liable for non-compliance with public issue norms and was sought to initiate proceedings against certain non-executive
- It further held that no liability could be imposed on a non- executive director in his capacity as ‘officer who is in default’ where a company had a managing director or a whole time Director or manager.
- It was observed that there are no documents or evidence, Consequently, it is not possible to hold the non-executive director as an officer in default.
OTHER UPDATES
1. NCLAT issues checklists for filling appeals under Companies, Act, 2013 and Insolvency and Bankruptcy Code, 2016.
- Every Appeals shall be presented in Form NCLAT-1 along with an affidavit in Form NCLAT-4 of the National Company Law Appellate Tribunal Rules, 2016 (Rules)
- Pagination to be done as per
- Colour scanned copies to be uploaded
- Filing fees to be paid by bharatkosh or DD
NCLAT issues checklists for filling appeals
2. OTHER UPDATES
Income Tax Department clarifies on Inoperation of PAN of NRIs/OCIs
- Residential status of NRIs determined basis the last 3 years assessment and their PAN is made inoperative.
- NRIs/OCI/ Foreign Citizens whose PAN is made inoperative can contact their Jurisdictional assessing officer
- Inoperative PAN can still file ITR.
Conclusion: July 2023 has been a significant month for securities and insolvency law, with the SEBI introducing noteworthy amendments to streamline operations and enhance disclosure norms. The case laws have also provided much-needed clarification on issues related to insolvency and securities law, leading to an enhanced understanding of these complex regulations. Going forward, these updates are expected to have far-reaching implications for market participants, underscoring the importance of staying abreast with these legal shifts.
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Disclaimer : This newsletter is a compilation of updates prepared and circulated from the academic point of view only and are not intended to constitute professional advice on any matter. The views and opinions expressed in this newsletter are those of the author of this document and are based on the internal research done by the Author.
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